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Johannesburg - The JSE recovered on Thursday morning with a rally as dramatic as Wednesday’s sharp losses, when the local market followed world markets lower on concerns about the devaluation of the Chinese currency.
It seems investors realised overnight that they had overreacted on the possible effects of the Chinese devaluation, and tried from the outset to put matters to rights.
The All-share index, which lost 3.16% on Wednesday, opened more than 1.7% higher on Thursday morning and then moved sideways for the rest of the day.
The index opened at 51 295 points, 824 points or 1.7% higher than Wednesday’s close, and then moved sideways; by midday it was 884 points or 1.74% higher, only 60 points better than the opening level.
The Top 40 index, which lost 3.52% to close below 45 000 points at 44 980, started trading more than 1.6% or 768 points higher. By midday it had gained only another 163 points to be 2.07% stronger at 45 912.
Thursday's big movers were the Industrial and Financial indices which had been Wednesday's big losers, with industrials the star performers. The index, which lost 3.82% on Wednesday when investors sold double-listed shares on a big scale, was 2.2% higher by midday.
The Financial index was 1.59% higher and the Resources index 1.41% up, with gold losing 3.41% due to a slightly lower gold price.
The recovery was started by Wall Street's sharp rebound on Wednesday evening, and on Thursday morning European and Asian shares were also higher.
China’s stocks rose for the first time in three days as declines for the yuan eased after the People's Bank of China signalled support for the currency.
There is no basis for the depreciation to persist and the central bank is capable of keeping the currency at an equilibrium level, PBOC assistant governor Zhang Xiaohui said Thursday at a briefing in Beijing.
“We felt it’s been an overreaction,” said Sean Darby, Jefferies Group’s chief global equity strategist in Hong Kong.
The mood on world markets was also lifted by a higher oil price, with Brent crude trading above $50 again as the International Energy Agency said that world oil demand is growing at its fastest pace in five years.
The agency attributes this to rebounding economic growth and low prices, which eased concerns about world economic growth. However, it said that global oversupply is so great that it will last through 2016.
Naspers [JSE:NPN], one of Wednesday's biggest losers after shedding more than 6% in afternoon trade due to its exposure to the Chinese economy, at midday was 7.32% higher at R1 743.91.
Most of the recovery also happened in the opening trades, with the share opening almost 7% or R105.00 higher at R1 730. This meant the share price gained only R11.92 the rest of the morning.
Among the other big shares that dropped sharply on Wednesday, Richemont [JSE:CFR] gained 2.30% to R102.92 and BHP Billiton [JSE:BIL] traded 2.32% stronger at R231.60. Steinhoff [JSE:SHF] was 0.64% stronger at R77.21 after announcing details of its planned listing in December in Frankfurt. The company will still be managed from South Africa and will have an inward listing on the JSE.
In the financial sector, Sanlam [JSE:SLM] jumped 2.48% to R65.62 and Standard Bank [JSE:SBK] was 0.53% stronger at R154.81.
